A trader works on the floor of the Buenos Aires Stock Exchange in Buenos Aires, Argentina.

The Argentine peso notched a record low against the U.S. dollar on Wednesday after the South American nation failed to win back emerging market status.

The dollar-peso pair hit a high of 16.465 before trading around 16.3.

MSCI announced Tuesday afternoon it's keeping Argentina's "frontier market" status and will not include its stocks in the emerging markets basket. Investors were largely expecting Argentina to be added back into the group. Argentina was demoted to frontier status from emerging market in 2009 by MSCI after capital flow restrictions were placed on the local equity market.

Argentine stocks also took a hit Wednesday, with the Merval index falling nearly 5 percent, on track for its worst day since June 19, 2014.

"MSCI admits they are doing good things (lifting capital controls; abolishing FX restrictions) but not for long enough to 'be deemed irreversible,'" Geoff Dennis, a strategist at UBS, said in a note Wednesday.

"However, we think the long-term picture in the country still looks good and we would look to buy any decent-sized dip in the market over the next few weeks," he said.

The Merval has already posted sharp gains for the year, advancing approximately 22 percent in the period. The index has easily outperformed other major stock indexes since 2013, including the S&P 500.